While her relationship with Mr Sarkozy has not been smooth, his replacement by Mr Hollande threatens to blow apart the partnership that has seen their two nations push through tough reforms across the region.

In an apparent rebuke to Mr Hollande, Italy's technocrat leader Mario Monti and European Commission chief Jose Manuel Barroso made a joint statement in which they criticised debt-fuelled growth measures.

"We agreed that the revival of growth must come through a relentless focus on improving competitiveness and not through higher levels of debt," they said after a meeting.

However, Ms Merkel faced trouble at home as opposition politicians joined Mr Hollande in his bid to make the austerity pact more flexible. They complain that the "one-size-fits-all" rules do not suit Germany's individual states and municipalities.

The question of how to address the eurozone's debt burden is toppling governments across Europe. The three-month-old Romanian government fell on Friday as it lost a no-confidence vote over state asset sales.

Against a backdrop of rising concerns, the pound hit a two-and-half-year high against a basket of currencies tracked by the Bank of England.

Italy, the eurozone's third largest economy, paid more to get auctions of its government debt away on Friday morning. It paid yields, or implied interest rates, of 5.84pc on its 10-year bonds, up from 5.24pc last month.

Separately, Ireland slashed its growth forecast for this year from 1.3pc to 0.7pc.